The Senate’s Permanent Subcommittee on Investigations is holding a hearing on “Conflicts of Interest, Investor Loss of Confidence, and High Speed Trading in U.S. Stock Markets,” and MarketWatch’s Steve Goldstein will be live-blogging the proceedings on this high-profile topic.

The lineup for today’s hearing is pretty strong: You have Brad Katsuyama, the chief executive of upstart soon-to-be-exchange IEX, and better known as the hero of Michael Lewis’s “Flash Boys.”

There’s executives from both the NYSE Group and BATS. There’s Joseph Brennan of Vanguard, the index-fund giant which has defended the HFT firms. There’s also a Notre Dame professor well-versed on the subject and an executive from TD Ameritrade, which has routed retail trades to venues where, supposedly, HFT firms can pick them off.

Want some interesting HFT reading? Try this lawsuit — “very dialed into latency arb,” according to Rich Gates, who if you’ve read “Flash Boys,” was a mutual fund manager who conducted a test to figure out how these firms were getting the better of his trades.

Thomas Farley, president of the New York Stock Exchanges, notes that 40.5% of trading last week was off-exchange, a record high. ‘We find this troubling and damaging to price discovery,” he writes.

He also is advocating the elimination of maker-taker pricing and the use of rebates. “Broad adoption of this policy would reduce the conflicts inherent in such pricing schema and further reduce complexity through fewer order types and fewer venues,” he says.

What about high-speed data feeds and colocation, in which the NYSE gets paid to make it easier for HFT to get information on trades? “NYSE is willing to put all options on the table as it pertains to the delivery of market data, however we highlight that this cannot be done in a vacuum and any changes must be applied equally to all exchange and dark pool venues.”

Joe Ratterman, CEO of BATS Global Markets, quotes SEC Chairwoman Mary Jo White approvingly: “I agree with the sentiments recently expressed by SEC Chair Mary Jo White, who said that our markets are “not broken, let alone rigged.” Evidence overwhelmingly demonstrates that the automation of the market over at least the last decade has resulted in significant enhancements in market quality for long term investors, whether retail or institutional.”

One of his suggestions: “I support the voluntary initiatives of some ATSs to make public their Form ATS, and additional regulatory action could be considered to require ATSs to provide customers with their rules of operation, which would include order types, eligible participant and participant tiers, all forms of data feed products, and order-routing logic and eligible routing venues.”

Ratterman also has an idea on how to limit complexity: Until an exchange gets more than 1% market share over three months, they shouldn’t be protected under the order protection rule and they shouldn’t share in or receive any Reg NMS plan market data revenue.

Vanguard’s head of global equity index group, Joseph Brennan, also says markets are not rigged. “Individual investors who access the equity markets through asset managers like Vanguard have, without question, benefited from the market structure improvements that have been made over the last twenty years.”

On HFT: He says market structure should be examined holistically and HFT shouldn’t be banned. (An aside: No one seriously is talking about banning HFT.)

Rich Gates adds, however: “2/3 of American distrust the structure of the stock market? So, they don’t own stocks? I think the huge drop during financial crisis is the real reason investors distrust the stock market. Not issues with Reg NMS and HFT….”

By the way, if you’re wondering where Michael Lewis is when discussing the topic that he made famous, the answer MarketWatch has learned is, Norway. Whether for vacation or another book is anyone’s guess.

Standardization of Data:1. When data is requested of participants, ensure that a standard for how the data should be derived and presented is clear and concise.2. Require market systems, broker-dealers, exchanges, ATSs and SIPs, to time stamp messages sent, received and used internally to a standard granularity of at least microseconds with specificity on where in the system it was recorded.3. Improve atomic clock synchronization from a one second tolerance to one millisecond or finer.

Data requirement examples:1. Public disclosure of an anonymous breakdown of subscribers by volume on any registered trading venue (ATS and Exchange).

2. Public disclosure of an anonymous breakdown of message traffic and message to trade ratio by subscriber on any registered trading venue (ATS and Exchange).3. A complete audit trail of how client orders are handled, including both routing and trading information, available to the client upon request.Market Operation Disclosures:1. Plain language rules and common use examples for proposed rules for products and services offered by exchanges.2. Require public disclosure of alternative trading systems’ Form ATS and subsequent products, services, and pricing.3. Ensure an adequate amount of reporting between exchanges and brokers, as well as between brokers and clients – whereby execution data and routing data is standardized and available upon request.4. Define acceptable tolerances for trading, market center and inter-market communication system performance to ensure there are no meaningful risks to the integrity of the system in the context of structural inefficiencies which could allow unfair advantages and disadvantages to certain market participants.

Brad mentioned “perverse incentives.” He is right! That is why IEX rocks – when presented with those conflicts of interest, IEX made the right choice. And, equally important, it was willing to stand up and shine a light on its competitors who succumbed to the “perverse incentives.”

Here’s a comment from The Modern Markets Initiative — the trade group representing the HFT firms. Doesn’t say much, but here we go:

“The Modern Markets Initiative applauds efforts to strengthen ourfinancial markets and root out bad actors in today’s marketplace, nomatter the frequency of trading.“Though the witnesses have different perspectives on how to improvefinancial markets, they all agree technology has greatly benefitedtoday’s modern investor and the benefits of high frequency tradingshould be preserved.“Today’s modern markets offer lower costs and more transparencythan ever before for retail investors. The MMI supports efforts toincrease transparency and the availability of data to ensure that futureinnovations benefit all market participants.”

McCain asks impact of banning “maker-taker” on operations. BATS’s Ratterman says they would have change the way they charge. “It’s not fundamental, we would adjust our pricing to whatever framework the law would allow.”

NYSE’s Farley says result would be fewer order types and fewer venues. If you ban maker-taker without doing more, volume would shift to darker markets, he adds.

Levin wrapping up hearing, saying conflicts and HFT contribute to lack of confidence and leaving investors worse off. “Hopefully, the regulatory agencies will take action,” he said, adding he hopes the SEC doesn’t take as long as they take on some other actions.

And it’s over. To recap: this hearing was very much focused on order routing. If y ou want more high-frequency trading discussion, there’s another one in the Senate Wednesday, this time from the Senate Banking Committee. (MarketWatch won’t be providing blow-by-blow on account of the Fed decision.)